In a historic decision late last week, the Supreme Court of the United States ruled that many of President Donald Trump’s sweeping tariffs are illegal, but the administration is doubling down.
First things first: In a 6-3 decision, the U.S. high court struck down the legal justification for the so-called “reciprocal” tariffs and the enactment of levies against several countries, including Canada, Mexico, and China, tied to the flow of illegal drugs into the U.S., most notably fentanyl, as detailed in a CBS News report.
The court essentially found that Trump did not have the authority to enact the tariffs under the International Emergency Economic Powers Act (IEEPA), a 1977 statute.
When imposing the levies last year, the President claimed that trade deficits and the influx of fentanyl and other illegal drugs into the U.S. constituted national emergencies.
The court’s decision could require the U.S. to pay back billions in refunds to businesses, with about $130 billion reportedly collected in IEEPA tariffs as of mid-December, but no guidance has been issued at this time.
What they’re saying: "[W]e think it's reasonable to assume a few months would pass before refunds begin, and even longer if the distribution faces significant legal challenges," Morgan Stanley analysts said in a report (via CBS News).
Yes but, almost immediately after the announcement, the President said he would replace the tariffs struck down by the court with a 10% levy on all goods coming into the US. By Saturday, he announced on Truth Social that these levies would be increased to 15%.
Why it matters: This ruling is less about immediate vehicle pricing relief and more about demand and deal flow. If household costs ease as broad tariffs unwind, some shoppers may feel slightly more confident (or have a bit more monthly room) to move forward on a purchase, even if MSRPs and parts-driven costs don’t materially fall. It also reduces one source of policy whiplash, which helps forecasting, ordering, and inventory decisions.
Between the lines: The impact of the court’s decision on existing tariffs tied to the auto industry isn’t as cut-and-dry as other business sectors.
The court’s IEEPA ruling primarily concerns “reciprocal” tariffs on imports from Canada, Mexico, and China, generally ranging from 10% to 50%.
Tariffs imposed under other legal authorities (including those on vehicles, auto parts, and certain raw materials) are not affected by the ruling and remain in force.
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What they’re saying: “Let’s be clear, IEEPA wasn’t the tariff authority directly driving auto costs. Sector 232 is where the real impact sits, particularly around steel, aluminum, and imported vehicles,” Cox Automotive Executive Analyst Erin Keating told CDG News. “What the Supreme Court ruling does is remove a layer of policy volatility. That matters for planning and capital allocation. But unless there’s movement on 232, the underlying cost structure for automakers and suppliers doesn’t materially change.”
Consumer view: Analysts estimated that IEEPA tariffs would cost each household roughly $1,000–1,300 in 2025–26 through higher prices on a broad basket of goods. With the IEEPA tariffs struck down and not fully replaced, that incremental burden could fall by roughly half, to around $600–800 per household in 2026, according to Yale Budget Lab.
The silver lining: “So far, automakers appear to be absorbing much of that pressure. Edmunds data shows that average transaction prices for new vehicles remain historically high but have stayed relatively stable in recent months, even as tariffs remain in place,” Jessica Caldwell, Edmunds’ head of insights, emailed in a statement to CDG News.
That stability, however, reflects a delicate balancing act. The industry is already operating in a challenging affordability environment, with elevated vehicle prices and persistently elevated interest rates making financing more expensive for consumers. If cost pressures continue to build, automakers may have less room to shield shoppers from higher prices — but for now, the broader market impact is still playing out.
Bottom line: Until there's movement on 232, dealers shouldn't expect meaningful relief on vehicle costs or parts pricing. What the ruling does buy is a slightly more stable planning environment, and if household budgets loosen a bit, some fence-sitting shoppers may finally move.
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